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No Spill Act Liability for the State of New Jersey for Discharges Occurring Prior to 1977

No Spill Act Liability for the State of New Jersey for Discharges Occurring Prior to 1977

March 2017

CSG Environmental Law Alert

The NJ Supreme Court has held that sovereign immunity protects the State of New Jersey from Spill Act claims arising from discharges prior to the Act’s 1977 effective date. In the same decision, the Supreme Court held that the Tort Claims Act (“TCA”), which has strict notice timelines for claims against the State of New Jersey, does not apply to Spill Act claims. The Court also confirmed that the State is not liable under the Spill Act for issuing permits or other regulatory decisions.

The case, NL Industries Inc. v. State of New Jersey, arises from contamination in a seawall built in Laurence Harbor in the early 1970s. A factory owned by NL Industries at that time produced slag as a by-product, which was deposited along the seawall at the time of construction. The New Jersey Department of Environmental Protection (“NJDEP”) became aware of the slag dumping along the seawall during construction, but did nothing. The slag was rediscovered in 2007. In 2009, the seawall became a Superfund site and the U.S. Environmental Protection Agency ordered NL Industries to remediate the slag contamination. NL Industries sought contribution from the State pursuant to the Spill Act based on the seawall being constructed on property owned by the State and based on NJDEP’s role as regulator at the time of construction. The State moved to dismiss based on sovereign immunity and failure to provide timely notice as required by the TCA.

Sovereign immunity protects the State from liability in State courts absent its consent to liability. The Spill Act clearly provides the State’s prospective consent to liability. The 1979 amendment to the Spill Act also clearly provides for the State to seek contribution for pre-Spill Act enactment discharges. The trial court and Appellate Division had analyzed that and other amendments to the Spill Act to determine that the State was also liable for pre-Act discharges. The Supreme Court reversed, finding that “retroactive waiver of sovereign immunity requires the clearest of expression” which could not be found in the Spill Act.

The Court also rejected NL’s regulatory liability arguments, stating, in dicta, that it could find “no clear evidence in the legislative history of the Spill Act that it was intended to strip the State of immunity for the discretionary governmental activities of the sovereign.”

Writing in dissent, Justice Albin stated that the decision contradicted the holding in DEP v. Ventron, the landmark Spill Act decision which found retroactive Spill Act liability for any person, including, according to the dissent, the State. The dissent states that the majority decision creates the “absurd result” that a private party is liable for the entire cleanup cost of pre-Act discharge caused jointly by both a private party and the State “even when the State is ninety percent responsible.”

The NL Industries decision will frustrate the equitable allocation of cleanup costs for pre-1977 discharges for which the State would be otherwise responsible. As explained in the dissent, deviations from the equitable allocation of fault upset the balance crafted in the Spill Act and discourage responsible parties from conducting cleanups. While it is too soon to predict the fallout, if any, from the NL Industries decision, the potential inequities to other responsible parties may prompt legislation to amend the Spill Act in accord with the dissent. In the meantime, parties seeking compensation from the State under the Spill Act must look to post-1977 discharges as a basis for such claims and need not worry about the TCA.